The Hindu Business Line : RBI bars sharing of customer data for cross-selling

IN a circular addressed to the Chief Executives of banks, the Reserve Bank of India (RBI) has directed banks not share to customer data with its affiliates and subsidiaries for cross-selling purposes.

The RBI-constituted Committee on Procedures and Performances Audit on Public Services, headed by Mr S.S. Tarapore, has observed that the information collected from the customer is being used for cross-selling of services of various products by banks, their subsidiaries and affiliates.

Sometimes, such information is also provided to other agencies.

With the onset of the retail lending revolution in the country two years back, banks have been using customer contact details for aggressively selling credit cards and mortgage loans.

"Banks, as they are aware, should know that the information provided by the customer for `Know Your Customer' (KYC) guidelines while opening an account is confidential and divulging any details thereof for cross-selling or any other purpose would be in breach of customer confidentiality obligations. Banks are, therefore, advised to instruct all the branches to strictly ensure compliance with their obligations to the customer in this regard,'' said the RBI notification.

Whenever banks desire to collect any information about the customer for a purpose other than KYC requirements, it should not form part of the account opening form.

Such information may be collected separately, purely on a voluntary basis, after explaining the objectives to the customer and taking his express approval for the specific uses to which such information could be put, it added.

The RBI has also advised banks to get the existing practices in this regard examined by the Ad hoc Committee/Board and issue suitable instructions to their branches and ensure compliance.

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